Insurance Council goes Galt

Written By: - Date published: 1:34 pm, November 3rd, 2013 - 62 comments
Categories: business, Economy - Tags: ,

Well that didn’t take long. The Insurance Council has come out attacking Labour for KiwiAssure. Which is odd really, given the claim that there’s already a competitive market. You’d have thought they would welcome a new member to the industry. Wouldn’t you?

Or alternatively, they’ve been making big money at the expense of all of us while the government turns a blind-eye, and now they’re panicking about the rort coming to an end.

Of course the Chief Executive of the Insurance Council, Tim Grafton, was also the Director of Strategy for Jenny Shipley, Chief Advisor to Bill English, and a Senior Advisor to Bill Birch. Which goes to show how permeable the line between the National Party and big business really is.

Ol’ Tory Grafton’s release makes for great reading though, aside from lacking any internal consistency (the “bad old days” theme of the title and first line isn’t addressed anywhere else in the release), I really enjoyed Grafton’s Atlas Shrugged* moment:

the last thing anyone should be doing is trying to drive away insurance capital,

What are they going to do? Pack up they’re bags and leave? Oh! No! Who would overcharge us for insurance then???

*HatTip: IB

62 comments on “Insurance Council goes Galt ”

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  1. Rogue Trooper 1
    3 November 2013 at 1:39 pm

    ICNZ- The goose that lays the Galten beg.

  2. tricledrown 2
    3 November 2013 at 1:49 pm

    Insurance companies are like the mafia using stand over and scare tactics to get money out of people for protection.
    But when it comes time to provide the protection they will

    use every tactic to get out of paying.
    This connection to shipley is worrying I would expect that these insurance companies will crank up the ChCh rebuilf to make National look good.

  3. Macro 3
    3 November 2013 at 2:32 pm

    But these people know about insurance – unlike you and me – so therefore they are obviously right, and we don’t know what we are talking about… Even though NZ has been the prime example of State funded and administered Health, Accident, Earthquake, Working Income, and Personal Belongings Insurance for decades

  4. newsense 4
    3 November 2013 at 2:55 pm

    “It makes absolutely no sense to have three State-owned insurers – EQC, ACC and now KiwiAssure.”

    Gosh and here’s me thinking the only thing propping up the government books was ACC. If we have two successful state insurers why wouldn’t a third be a good idea?

    For those of us too young to remember, what was the history of State Insurance, before it became State insurance?

    • alwyn 4.1
      3 November 2013 at 4:03 pm

      Very briefly the old State Insurance Company could be summed up as
      1. Cheap rates
      2. Would insure anybody
      Unfortunately it also was
      1. Very, very hard to get anything out of if you made a claim.
      2. Quite unhelpful and rude to its customers.
      I had a number of friends who, when young, insured with State. One had his car stolen and it was never recovered. Even after nearly a year the company wasn’t paying out for a total loss on the grounds that the vehicle might still be found! That seemed to me to be an excuse that ran out after about a month, but not to still claim it after a year.
      He did finally get his money but their behaviour was appalling.

      • Draco T Bastard 4.1.1
        3 November 2013 at 4:21 pm

        1. Very, very hard to get anything out of if you made a claim.

        The one time I made a claim it took less than a week. I actually had to return the check because the stolen item was recovered.

        2. Quite unhelpful and rude to its customers.

        That happens everywhere and the worst I’ve ever got has been from the private sector – especially banks. IME, it’s the abusive customers that don’t get helped, i.e, they’re their own worse enemy.

      • Tim 4.1.2
        3 November 2013 at 8:47 pm

        Well of course ACC is not what was intended by its architect either – having been neutered and fucked around with over the years by those with a neo-liberal approach to all and everything.

        They went for ACC, then the insurance companies – de-mutualisation et al >>> value for ‘shareholders’ and bugger all for customers.

        I imagine Labour intend implementing their policies with better oversight than has occurred in the past.

        Perhaps, since the Commerce Commission as been so bloody useless (enabling the rise of the duopoly and protecting corporate interests over those of the ‘consumer’ and ‘taxpayer’), Labour might have to provide them with some “GUIDLINES” (hint hint)

  5. Populuxe1 5
    3 November 2013 at 2:55 pm

    It’s hardly surprising – look at what the insurance companies are doing in the US in response to Obamacare

  6. newsense 6
    3 November 2013 at 2:56 pm

    Also if the foreign owned insurers are such good value and good insurers then they will keep their customers ahead of any government scheme surely?

  7. KJT 7
    3 November 2013 at 2:56 pm

    Just like the “competitive” banking industry suddenly found they did not have to charge as high a set of fees to make money, when Kiwibank started, the insurance industry are terrified they may actually have to become competitive.

    Time we got rid of the rort that is the private finance industry altogether. If they were really as efficient and competitive, as they claim, they would not be so scared of State competition.

    • Draco T Bastard 7.1
      3 November 2013 at 4:23 pm

      The reality is that private companies can’t compete with government in efficiency or costs.

      • TheContrarian 7.1.1
        3 November 2013 at 4:37 pm

        Private health is far more efficient than the public health system. Don’t get me wrong, I love NZ’s public health system but private is easily more efficient in many areas.

        • Draco T Bastard 7.1.1.1
          3 November 2013 at 5:53 pm

          Ah, no it’s not. You get lack of waiting lines in the private sector not from them being more efficient but because so many can’t afford them. The public hospital system is inundated whereas the private system isn’t.

          Compare them side by side and you will find that the private system is less efficient. They have more expenses (advertising, profits) and they don’t reach the full population. The last time I read (admittedly a while ago) a comparison between the US and NZ was that the US cost US$6000 per capita and only reached 5/6ths of the populace compared to NZ US$2000 per capita while reaching close to the full population.

          No, the private system is not any more efficient. It, quite simply, can’t be.

          • TheContrarian 7.1.1.1.1
            3 November 2013 at 5:59 pm

            Well having spent a long time working in the public sector I was frequently frustrated by the bureaucracy, lack of innovation and inability to chart my own course without having to ask 6 different people and waiting weeks to get answer. Moving to private I really noticed how much more efficient it was.

            “No, the private system is not any more efficient. It, quite simply, can’t be.”

            Yes it can.

            • Lanthanide 7.1.1.1.1.1
              3 November 2013 at 6:06 pm

              That’s a symptom if it being publicly funded. My uncle tells similar stories about Telecom before it was privatised in terms of having to go through multiple layers of bureaucracy trying to justify to get things done (where this can be as simple as asking for new stationary that is required to do your job), that in a private environment the barriers largely don’t exist.

              I guess this means in a private environment resources can be ‘wasted’ compared to a public, but I’d have to think that the over-the-top gatekeeping going on in a public system probably outweighs the cost of the waste in the private system.

              • TheContrarian …
                3 November 2013 at 6:08 pm

                You just need to watch the first episode of Revolution (in the side bar) to get an idea of how inefficient the govt. can be.

                I’ll give you a more recent example after eating my dinner…

                • TheContrarian …
                  3 November 2013 at 6:35 pm

                  I worked for a large govt department a few years back. They had a problem in which they were overpaying their staff, sometimes in large chunks.

                  There were two reasons for this:
                  *outdated and poorly utilised software
                  *A central payroll but decentralised HR

                  Firstly the software was not fit for use. It ran on a Monday – Sunday timescale but pay ran on a Wednesday to Wednesday. Also the paylips it produced were extremely difficult to understand
                  Secondly if someone working in Christchurch was receiving a particular allowance on top of their salary, say $40 p/week for using their own car as opposed to one provided by the department, and they changed to a car provided they’d put a slip into the HR department to cease the allowance. HR sometimes sat on that slip for up to a year, all this time payroll was still paying the $40 allowance not knowing it should be ceased. I was hired to get the money back and I knew what the problem was however no one wanted to deal with the systemic problem but rather clean up the aftermath. Anytime I wanted to make a change it would take ages because it had to go through several people, several departments and I would get the answer back to just carry on from someone who obvoiously hadn’t read what I had suggested. After 2 years I finally had some movement but then had my contract terminated because they just wanted to go back to how things were happening before.

                  What a complete waste of resources. Firstly the overpayments but secondly hiring me to fix it, paying the salary to me but taking none of the recommendations and continuing to make the same errors knowing that it could be fixed but no incentive to do so. A private company would have long gone bust.

                  • KJT …
                    3 November 2013 at 7:54 pm

                    I can tell many similar stories about the private sector. And for some reason they don’t go bust, and they keep paying the managers who make the stuff-ups even more millions.

                    Badly managed is badly managed, whether it is public or private.

                    The silly idea that any MBA can manage in any industry, whether they know anything about it or not has a lot to do with it.

                  • Craig Glen Eden …
                    3 November 2013 at 10:10 pm

                    Two words “Nova Pay”

              • Draco T Bastard …
                4 November 2013 at 12:34 am

                My uncle tells similar stories about Telecom before it was privatised in terms of having to go through multiple layers of bureaucracy…

                And yet I never had such a problem.

                Anecdotes != truth.

            • greywarbler 7.1.1.1.1.2
              3 November 2013 at 8:41 pm

              The C
              Did you ever read the Brit book written on the start of reorganisation of their public service ‘Your Disobedient Servant?’
              Author Leslie Chapman 1978

            • Draco T Bastard 7.1.1.1.1.3
              4 November 2013 at 12:32 am

              Well having spent a long time working in the public private sector I was frequently frustrated by the bureaucracy, lack of innovation and inability to chart my own course without having to ask 6 different people and waiting weeks to get answer.

          • Lanthanide 7.1.1.1.2
            3 November 2013 at 6:03 pm

            Comparing US healthcare to NZ healthcare to judge private vs public is pretty pointless, because the systems are just so different in terms of treatments offered and population dynamics etc. You’d be better off comparing private hospitals in NZ to public hospitals in NZ.

            Anyway, private hospitals in NZ simply don’t do the same range of services as public hospitals. For example all emergency surgery and admissions are taken care of by the public service. It’s only things like scheduled exams and surgeries that are done in private.

            • TheContrarian 7.1.1.1.2.1
              3 November 2013 at 6:36 pm

              Agreed – bad example

            • Draco T Bastard 7.1.1.1.2.2
              4 November 2013 at 12:45 am

              Comparing US healthcare to NZ healthcare to judge private vs public is pretty pointless, because the systems are just so different in terms of treatments offered and population dynamics etc.

              Nope and the reasons for that is that a large chunk of the cost of running the US health care system is advertising, another large chunk goes into excessive CEO and upper management pay rates, ~10% into profits and then there’s a fairly large chunk that goes into not paying out claims. They’ve actually ended up with more bureaucracy. There’s a reason why ObamaCare has that a minimum of 80% premiums gets spent on actually providing health services. After all that, their outputs aren’t any better than ours.

              I was, quite simply, comparing a highly inefficient system (US health care) with a highly efficient one (NZ health care).

              • Tat Loo (CV) …
                4 November 2013 at 12:51 am

                Don’t forget shareholder dividends. Lots of shareholder dividends for lots of large, wealthy institutional investors.

        • miravox 7.1.1.2
          3 November 2013 at 6:05 pm

          “Private health is far more efficient than the public health system”

          I’m thinking you have a pretty narrow definition of efficiency there.
          the U.S. spends more on health than any other country, has quality that is no better and has the most unequal access in the developed world.

        • KJT 7.1.1.3
          3 November 2013 at 6:07 pm

          Another comedian.

          The US private system costs hugely more than any public one for much less coverage and worse average health care.

          Having worked for both private and Government organisations I can say that stultifying bureaucracy and poor management are endemic in the private sector, and State enterprises, run like a business.
          http://kjt-kt.blogspot.co.nz/2013/05/government-should-be-run-like-business.html

          Especially as we hugely reward managers who know nothing about the business, apart from cost cutting, asset stripping and screwing staff.

          • newsense 7.1.1.3.1
            3 November 2013 at 6:18 pm

            I really dislike this- it’s public so it must be less efficient thing. A well run service with enforced targets and accountable people will be efficient either way.

            A crap company will be a crap company, public or private.

            Govt. can be inefficient, it can be efficient. Private companies can be efficient, they can also criminally neglect to invest, aim to confuse to essentially defraud as a business strategy etc etc…

            Certainly the arguments given for private companies about competition frequently seem to be a crock of crap…

          • Tim 7.1.1.3.2
            3 November 2013 at 9:09 pm

            “Having worked for both private and Government organisations I can say that stultifying bureaucracy and poor management are endemic in the private sector, and State enterprises, run like a business.”

            EXACTERY

            I recall people moaning about bureaucracy in the old Ministry of Works; lazy buggers leaning on shovels; all the usual. Then you realise what they actually achieved, and contrast it with the bloody FultonHogan/Chorus/subcontractor/subcontractor/self-employed approach – a Warehouse type “everyone gets a bargain/everyone clips the ticket”.

            Vogel Computer Centre was run on extremely tight reins and supported a number of departments. Moving on to the banking sector from there (Databank and trading banks) was a bloody eye opener in terms of inefficiency, waste, needless bureaucracy, difficulties in getting decisions made, troughing, management being wined and dined by salesmen – then making technical decisions for which they weren’t qualified ….. the list goes on.

            Government Departments run on corporate lines are the problem – often run as highly paid CEO’s feifdoms. That’s what the 1980’s brought us all.
            The old public service might have been ripe for ridicule, but post-Douglas et al I think I’d rather have walk shorts, socks and sandals!

            • greywarbler 7.1.1.3.2.1
              4 November 2013 at 10:11 am

              Tim
              You mention fiefdoms. That causes me concern too.

              There is the Transport one where there is a huge budget for them to spend however they like, providing they can produce apparently irrefutable stats to back their ideas. And they are so sure they are right. Consultation is about perhaps leaving a memorial tree on the blitzkreig road they are planning.

              Government, seems to hand over its authority completely to the administrators. ‘I can’t do anything it’s an operational matter.’ Or the plan has been researched and consulted on for years, it’s time to move on it. A road to hell, nice and straight and fast. I’m not saying that they are all wrong but they have too much autonomy.

        • QoT 7.1.1.4
          3 November 2013 at 6:25 pm

          private is easily more efficient in many areas.

          Only because our public system carries the bulk of healthcare. It’s really easy to deliver fast and effective services when other organisations are picking up the bulk/the difficult cases/backing up your shit when things go wrong.

          • Psycho Milt 7.1.1.4.1
            3 November 2013 at 7:12 pm

            Funny how this fairly obvious point never surfaces when right-wingers are discussing how much more “efficient” private health care is. Make private hospitals open emergency departments and deal with everything affecting all comers and see how much better the service they provide is then…

          • Funny 7.1.1.4.2
            3 November 2013 at 8:03 pm

            Spot on

  8. Will@Welly 8
    3 November 2013 at 2:59 pm

    The neo-liberal culture is suddenly confounded by a dilemma not of its own making. A political party wanting to set up an insurance agency to compete with other businesses on the free market.
    Suddenly the “level playing field” isn’t so level any more. How friggin’ sad. Instead of ripping off Kiwis, the insurance companies might have to pull finger and do something pro-active ,

  9. Venezia 9
    3 November 2013 at 4:43 pm

    This news about a state owned and run insurance company is great news indeed especially to those of us in Christchurch who have borne the brunt of the dishonest international corporate versions. I will be one of the first to sign up when KiwiAssure gets up and running.

  10. Tracey 10
    3 November 2013 at 5:41 pm

    Nosense

    acc is not an insurance company. Thank you.

    • Draco T Bastard 10.1
      4 November 2013 at 12:57 am

      Well, it’s not supposed to be. It’s supposed to be a pay-go system but the stupid 5th Labour led government turned it into a fully funded insurance system. Since then it’s gone to hell.

  11. AmaKiwi 11
    3 November 2013 at 5:52 pm

    @ Zetetic

    You asked, “What are they (insurance companies) going to do?”

    Answer: Pour money into defeating Cunliffe / Labour.

    Entrenched campaign financing limits are essential or we will end with the American system: “the best government money can buy.”

  12. muzza 12
    3 November 2013 at 6:23 pm

    Banking and finance includes insurance, and in many instances are the same banks that have been annihilating all in their tracks, are the underwriters and owners of the insurance industry.

    Which is about all that needs to be known about the insurance industry, so of course they will be seeking to defend their stranglehold in this pacific island nation.

  13. insider 13
    3 November 2013 at 6:40 pm

    Kiwi bank already offers a full suite of home insurance and personal and life. Why is Cunliffe needing to reinvent what already exists? Isn’t the scandal that kiwibank is not already offering what he says his new scheme will offer?

    • felix 13.1
      3 November 2013 at 6:55 pm

      Perhaps you won’t vote Labour after all then.

    • IrishBill 13.2
      3 November 2013 at 7:07 pm

      Most of Kiwibank’s insurance offerings are third-party contracted by private sector insurers.

      • Psycho Milt 13.2.1
        3 November 2013 at 7:14 pm

        Exactly. Just like the private sector banks’ insurance offerings – funny thing, banks aren’t insurance companies…

      • insider 13.2.2
        3 November 2013 at 7:31 pm

        “We’ve teamed up with Kiwi Insurance Limited (a related company of Kiwibank) and TOWER Insurance Limited” So a mix of its own insurance and that of tower, a nz company.

        So Cunliffe is going to kill off this because…?

        Note that Cunliffeyeahsure will be reselling overseas backed insurance.

        • Draco T Bastard 13.2.2.1
          4 November 2013 at 1:01 am

          Note that Cunliffeyeahsure will be reselling overseas backed insurance.

          I hope not as that would be a really stupid idea as the Chch fiasco has already proved.

          • the pigman 13.2.2.1.1
            4 November 2013 at 1:22 am

            Yeah I suppose it is likely to use existing reinsurers, although clearly not that much detail is available at this stage.

            However, as for insurers of the affected Christchurch homes blaming their reinsurers (which I’m sure they do), it’s total bullshit. The insurers should be honouring their obligations and sorting out the disputes with their reinsurers separately, and hypothetically speaking, you’d certainly expect KiwiAssure to do so in order to avoid that situation.

            • Colonial Viper 13.2.2.1.1.1
              4 November 2013 at 6:21 am

              The NZ Govt will use some re-insurers, but it can also largely self insure. There is no reason for KiwiBank to offer third party insurance products once this is all set up.

        • SpaceMonkey 13.2.2.2
          4 November 2013 at 2:24 pm

          The Government is big enough to self-insure.

      • Lanthanide 13.2.3
        3 November 2013 at 7:31 pm

        IIRC a figure someone (Labour MP, Parker maybe? Cunliffe?) said was 98% of the insurance sector is owned by foreign corporates.

    • PleaseThinkOfThePuppies 13.3
      3 November 2013 at 7:13 pm

      Banks simply resell someone else’s product, they do not provide their own insurance services.

      When I was with ASB (customer for over 20 years, never got crap from them so moved to Kiwibank as soon as it started), my Life and Car insurance were all from someone else.

      Talking of crap service, was a Meridian customer for over 8 years and it was only once i cancelled my contract with them to go with the local power co that they rang up offering me a mediocre rebate (cancelled due to them being on the block).

      Hint to all biz out there, its easier to keep customers than gain new ones.

  14. QoT 14
    3 November 2013 at 8:19 pm

    drive away insurance capital

    This may be a completely obtuse comment, as I know sweet fuck-all about the insurance industry, but:

    Isn’t a good proportion of the insurance industry’s capital our capital? It’s not like they stick a whole lot of their own money into a term deposit and let us use it to rebuild houses and buy new cars for free.

    • Lanthanide 14.1
      3 November 2013 at 9:00 pm

      Insurance companies have big big pots of money. Premiums really make up their profit stream; the underlying capital acts like an endowment that keeps them in business. I believe there’s also regulatory requirements around how much money they need to have on hand etc.

      • felix 14.1.1
        3 November 2013 at 9:20 pm

        If that’s the case it’s just more reason for publicly owned alternatives without the dead weight loss that the “profit” represents.

      • Tat Loo (CV) 14.1.2
        3 November 2013 at 10:24 pm

        Insurance companies have big big pots of money.

        The NZ govt has big pots of money.

        And unlike insurance companies, the NZ govt can always issue more money if required, so it is always a safer, cheaper underwriter.

        • SpaceMonkey 14.1.2.1
          4 November 2013 at 2:28 pm

          “And unlike insuarnce companies, the NZ govt can always issue more money if required”

          Not quite… not under the current financial system. Banks create currency. But the NZ Govt can borrow money a lot more easily than most…

          • Tat Loo (CV) 14.1.2.1.1
            4 November 2013 at 2:48 pm

            Do you know of any entity in the world apart from the NZ Government which can legally print a $100 note?

            If required the Reserve Bank can credit the Government’s accounts as required.